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  • Debt & Negative Equity

    Investor set for hunger strike against bank



    A property investor who was made bankrupt by his bank is threatening to go on hunger strike to draw attention to what he believes are unfair practices.

    John Guidi, 63, blames Clydesdale Bank for the collapse of his residential property portfolio, which consisted of 150 properties.



    It seems from the above story that Mr. Guidi had interest-only mortgages that reached their term and he was not able to re-finance them due to changes in lending criteria.

    It seems hard to understand how he let things go so wrong when he would have known that the mortgage term was coming to and end well in advance.

    This is a salutary warning with several lessons:

    1.  If you are on interest-only mortgages, you need a clear way to exit or re-finance and should be thinking about this when you take the mortgage out and start making your provisions at least a year before the term ends.

    2.  Banks can be very aggressive in calling in loans, especially where there is a personal guarantee (as in this case).

    3.  If you are struggling with such a situation, the earlier you seek professional help, the more options you will have at your disposal to solve the problem and perhaps retain some of your assets.

    4.  A highly leveraged portfolio of properties with limited or zero equity is a high risk scenario and puts the investor far more at the mercy of the bank.

    Interesting to note that Cerebus was involved in the case.  They are the same company who have purchased some of the MX/UKAR loans and are known to be very aggressive.

    Hat tip to Alex Williams for sharing this on the HMO Group on Facebook.  Alex also gave this excellent advice:

     "Borrow for the bad times.  It is not how good the deal is now, it is whether it will be punitive outside it's 'deal period' and whether its term can outlive the next recession."

    Banks have the remit to "treat consumers fairly", so if this is not the case, consumers can call on the Financial Ombudsman for support and advice.

    Additionally, Landlord Debt Advisory are Property Tribes' partner for assisting with debt and negative equity issues.  LDA are the only FCA regulated company in the UK for this type of assistance and the friendly and supportive team can be contacted on 0161 222 4311.

    SEE ALSO  -          -ve equity + interest only = deadly combo

    UP NEXT -              Buy to Let Interest Only - we were mis-sold

    DON'T MISS -        Distressed landlord Case Settlement & Process

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    If he has been made bankrupt by the bank that would indicate that the bank has not recovered all the money that was owed.

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    Indeed, and it suggests there was a significant shortfall, otherwise the bank may have taken the view to write it off or apply a second charge loan to Mr Guidi's residence (assuming sufficient equity).

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    I'm not surprised to hear this. I noticed a few years ago that I was only being offered 22 year mortgages instead of 25 years because of my age (47 at the time), whereas if the property was owned by a company then I was still able to get 30-year mortgages.

    It occurred to me at the time that maybe this is why a lot of landlords retire and sell off - because they can't remortgage - instead of just renewing and keeping the properties as an ongoing asset for your retirement and children.

    I too have interest-only mortgages on my personally owned properties and need to move them into a company before those mortgages expire.

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    It says there is a personal guarantee which suggests the properties and mortgages may be within a company.

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    I hope he decides to eat some food. As it doesn't sound like he has much of a case. I can't help but think that this laissez faire attitude to risk is what makes a lot of entrepreneurs so successful at growing businesses fast. Sometimes the only way to achieve your goals is to stick your head in the sand.

    Personally I don't think the upside is worth the downside. I love food and my family and will try to manage the downside by these techniques:

    • Hold 10% cash against each property
    • Take fixed-rate mortgages
    • Stagger fixed-term completion dates
    • Reinvest majority of profit in shares
    • Keep on top of the quality of the properties to ensure they are lettable
    • Keep track of equity/gearing
    • Add to portfolio gradually rather than in a concentrated period
    • Start considering selling 5 years before the mortgage term ends

    Does anyone have any other tips for managing risk?

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    Thank you for sharing, good reminder for those on Interest Only mortgages

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    Hardly the bank's fault that he's a bad businessman.

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    That did cross my mind.  We have 10 years to run on most of our BTL mortgages and the banks have already started contacting us asking what method we intend to use to repay the mortgage.

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    Hi Brian,  It was different for each property/lender - some would be sold, others would be re-mortgaged, and some would redeemed via personal savings.

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